John Harrison of JFH Jewels grew up in the jewellery business, learning his trade at his jeweller father’s elbow before going on to work for one of his father’s suppliers. By 2016 he was ready to go out on his own.
Having spent so long in the industry meant he had enormous expertise about jewellery. But when it came to business administration it also meant he did things the way they had always been done. For customer orders, that meant pen and paper. “I knew no different,” he explains.
Getting a digital mentor from his Local Enterprise Office (LEO) changed everything, showing him the gains he stood to make by digitising his processes, something he had previously thought was “for the big guys” only.
Working with his digital mentor, he transferred the sales-ordering process from an A4 sheet to an app-based solution for a tablet. Previously he went back to the office after all his sales trips to update orders manually. Now as he travels the country selling to store owners, he simply uploads orders back to the office for instant processing. He quickly began digitising his stock-management system too, leading to even greater efficiencies.
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All of which freed him up to spend more time working on the business rather than in it – and growth followed. Before, Harrison admits, “I was not working smart; I was working the only way I knew.” Now, he explains, digitisation “has made us far more productive, streamlined and efficient”.
Harrison’s experience speaks to an issue that has long been flagged here. According to a 2019 report from the OECD, Ireland had a large population of “very low productive SMEs, that coexist with high productive large firms”. Small and medium-sized business accounted for 70 per cent of employment but only 37 per cent of value added, it found. That compared to an OECD average of 68 per cent and 59 per cent respectively.
According to the report, SME and Entrepreneurship Policy in Ireland, business dynamism and the start-up rates here were both found to be relatively low. Moreover, Irish SMEs were shown to be not very active in international markets, while SME productivity growth generally was stagnant.
The upshot of the report was the need for Government to take a multipronged approach to increase SME productivity growth, including such measures as increasing the take-up by SMEs of Skillnet Ireland management training programmes, expanding LEO vouchers for digitalisation processes in SMEs, integrating international standards adhesion in SME development programmes and increasing SMEs take-up of R&D incentives.
Digital technology adoption rates were low in SMEs, it found, which would also affect productivity growth. Irish small firms (10-49 employees) are only around a third as likely as large firms to be using Enterprise Resource Planning (ERP), for example, a software platform that integrates core business processes in real time, facilitating decision making and helping to reduce waste.
Ireland’s direct SME export levels were also found to be very low by international standards, with only about six per cent of Irish SMEs directly trading across borders. Furthermore, a high share of existing SME exporters traded only with the UK, our nearest neighbour.
Although SMEs may also contribute to exports indirectly, for example by providing multinational firms with components and services, the share of SMEs in total domestic value added in exports was relatively low.
The report also identified weaknesses in SME management skills, capital investment levels and technology adoption.
Building skills to build businesses
“The importance of developing knowledge and skills among owner managers is well recognised,” says Dave Flynn, director of business networks at Skillnet Ireland, the business-support agency responsible for advancing the competitiveness, productivity and innovation of businesses through enterprise-led workforce development.
In a tight labour market it particularly behoves business leaders to work on productivity, he adds.
“But the challenge is where to start? And how to navigate across a range of agencies and bodies and institutions that can help? That is why the Government launched Skills for Better Business, a free online tool that allows SMEs to assess their management skills and identify critical improvement areas,” Flynn explains.
Owner-managers often think, ‘I don’t have time’ for training but actually you have to think about it in terms of the impact on the business
— Dave Flynn
The tool, which was launched in November, helps owner-managers spot gaps in their management skills and then provides a signposting service to help them find the right training and development solution, as efficiently as possible. It helps cut through the other primary challenge preventing SME owner-managers from engaging with training and supports that could boost productivity – a perceived lack of time.
“Owner-managers often think, ‘I don’t have time’ for training but actually you have to think about it in terms of the impact on the business,” says Flynn. “The onus is on agencies to frame it in this way to achieve uptake. Once they do it that way, owner-managers can see immediate benefits.”
Agencies included in the Skills For Better Business website include the education and training boards, regional skills forums, universities and higher-education providers, as well as Enterprise Ireland, the 31 LEOs and Solas, the state further-education and training agency.
Skillnet Ireland, also included, offers a range of management and leadership-development programmes through its 72 Skillnet Business Networks nationwide, which cover all sectors and regions.
Small to medium-sized businesses can also avail of expert mentoring and a range of management development supports through both LEOs and Enterprise Ireland (EI), as well as Skillnet Ireland initiatives such as MentorsWork.
Skillnet Ireland is also working to ensure Irish SMEs benefit from knowledge of systems and processes that help boost productivity in the foreign multinationals that are based in Ireland.
The Innovation Exchange programme, which was developed by Skillnet Ireland and Furthr (formerly DublinBIC) facilitates collaboration between Irish SMEs and large multinationals. It is scheduled to support more than 1,000 SMEs by 2025.
“The productivity gap between SMEs and foreign direct investment (FDI) is seen right across Europe but even despite this, Ireland lags,” says Flynn.
“Because we have such a large proportion of FDI in Ireland the assumption is that there is a huge level of collaboration and co-operation between it and the indigenous sector but actually that has to be fostered, which is why we launched Innovation Exchange last year,” he explains.
Progressing productivity
Progress has been made in other areas too. A progress report from the Government’s SME and Entrepreneurship Taskforce noted such achievements such as increasing the number of first-time exporters through the extension of the LEO mandate, and the introduction of a Digital Transition Fund to support companies at all stages of their digital journey.
The Digital Transition Fund helps SMEs to adapt to and take advantage of the digital transition in areas such as data, robotics, artificial intelligence, augmented and virtual reality and autonomous transport.
For Ciarán Gorman, co-founder of Bevcraft, a Mullingar-based maker of mobile canning services for the craft beer sector, investing in such equipment is a vital part of increased productivity. Investing in skills matters too. The company, which has offices in the UK, the Netherlands and Norway, is currently benefiting from an Enterprise Ireland-backed programme, GradStart.
“It has helped us to recruit graduate talent in specialist areas, bringing a degree of expertise to help boost productivity by designing a new production process from the ground up,” says Gorman.
The company was recently named as one of the Financial Times’ top 1,000 fastest-growing companies. It competes internationally by going into a market and out-competing the local competition and the way to do that is through productivity, explains Gorman.
“It’s all about investing in IT, in automation,” he says. “Having the best equipment is essential.”
